BILL ANALYSIS �
AB 1407
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Date of Hearing: April 22, 2013
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
AB 1407 (Committee) - As Amended: April 16, 2013
SUBJECT : Public utilities: resource adequacy requirement.
SUMMARY : This bill would require that the California Public
Utilities Commission (PUC) consult with the California Energy
Commission (CEC) in determining resources adequacy requirements.
Specifically, this bill :
EXISTING LAW
1)Requires the PUC, in consultation with the California
Independent System Operator (CAISO) to establish resource
adequacy requirements for all load-serving entities to achieve
specified objectives. (Public Utilities Code 380)
FISCAL EFFECT : Unknown
COMMENTS :
1)Resource Adequacy. The PUC's Resource Adequacy (RA) program
annually establishes minimum capacity obligation requirements
for PUC jurisdictional load serving entities (LSEs)3 on a one
year-ahead basis at both the system and local level.
In order to identify the amount of capacity needed, the PUC
undertakes a process with cooperation of both the California
Energy Commission (CEC) and the CAISO. The CEC forecasts the
amount of load that is expected in a year and the CAISO
forecasts the amount of resources that are needed system-wide
and in local areas.
The PUC considers both inputs, determines the appropriate
level of reliability, and then orders load serving entities to
procure capacity resource to that level. For system RA
requirements, the PUC uses a 15 percent planning margin. For
local RA requirements, the PUC considers a peak weather (1:10
year) and the loss of the two largest contingencies
(generation or transmission). The forecasted need for system
and local resources is split as RA procurement obligations
among load-serving entities (LSEs) in proportion to their
AB 1407
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coincident share of utility service area annual peak demand.
Resources that are available to produce electricity are
called capacity. A capacity shortfall occurs when there is
more electricity demanded from customers than can be provided
by the available capacity resources. To avoid capacity
shortfalls that can cause blackouts, system planners generally
plan the electrical system to have a comfortable planning
reserve margin. The PUC established that a planning reserve
margin of 15-17 percent above the forecasted electrical
capacity demand is an appropriate level of reserves to
accommodate both variations in weather and various types of
outages. The PUC's reserve requirement means more capacity
will be available than will be required to serve expected
load, and thus some capacity resources do not receive
substantial (or any) energy markets revenues. Sometimes this
dynamic is referred to as resources with little or no "run"
time. Resource owners generally structure their revenue
sources (e.g. contracts) such that they receive a capacity
payment to compensate them for the fixed costs of being
available, in addition to energy market revenues, to
compensate them for the variable costs of running in any
particular hour of the year.
2)State Energy Policy Coordination. The Little Hoover Commission
cited lack of coordination among state energy policy makers as
a problem for ensuring safe, reliable, and affordable supplies
of electricity. This bill would require the PUC to consult
with the CEC as well as the CAISO when determining RA
requirements.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file,
Analysis Prepared by : Susan Kateley / U. & C. / (916)
319-2083
AB 1407
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